President Joe Biden on Tuesday announced that he will tap the U.S. Strategic Petroleum Reserve (SPR) for 50 million barrels of oil in an effort to bring down prices at the pump.
“The move is aimed at global energy markets, but also at U.S. voters who are coping with higher inflation and rising prices ahead of Thanksgiving and winter holiday travel,” the Associated Press reported.
But the move will not have an immediate effect. The government will not move barrels into the market until mid- to late-December. And not all of the oil will hit the market: Biden said 32 million barrels will eventually be returned to the SPR, with the other 18 million authorized for sale by Congress.
“The actions are unlikely to immediately bring down gas prices significantly as families begin traveling for the holidays. Administration officials noted that gasoline usually responds at a lag to changes in oil prices, and they suggested this is one of several steps in ultimately bringing down costs,” the AP reported.
The White House said China, India, Japan, South Korea, and the United Kingdom will also tap into their petroleum reserves as part of a coordinated effort. “This culminates weeks of consultations with countries around the world, and we are already seeing the effect of this work on oil prices. Over the last several weeks as reports of this work became public, oil prices are down nearly 10%,” the White House said.
Biden’s move drew praise from senior Democrats, including Senate Majority Leader Chuck Schumer (D-NY).
“President Biden’s announcement is good news for American families and will strengthen our economy,” Schumer said. “Tapping the SPR will provide much-needed temporary relief at the pump and will signal to OPEC that they cannot recklessly manipulate supply to artificially inflate gas prices. Of course, the only long-term solution to rising gas prices is to continue our march to eliminate our dependence on fossil fuels and create a robust green energy economy.”
Prices at the pump have been rising steadily since Biden took office. But GasBuddy.com, a price-tracking website, said Monday that gas prices have fallen for two straight weeks to an average of $3.39 per gallon. Still, gas is $1.30 per gallon higher than a year ago, the site said.
“While there’s reason to be optimistic that the peak of gas prices will soon be behind us, the decline in the price of oil is likely reflecting the possibility of a coordinated global release of oil from strategic reserves,” Patrick De Haan, head of petroleum analysis for GasBuddy, said ahead of Biden’s announcement.
And supply is also dwindling.
“According to data from the Energy Information Administration last week, U.S. crude oil inventories fell 2.1 million barrels and stand 7% below the five year average for this time of year, while domestic crude oil production also saw a slight drop to 11.4 million barrels per day,” GasBuddy reported.
“Gasoline inventories fell by a slight 700,000 barrels and stand 4% below the five year average range, while distillate inventories also declined by 800,000 barrels and stand 5% below the five year average range. Implied gasoline demand, a proxy for retail gasoline demand, fell 18,000bpd to 9.24 million barrels per day. Refinery utilization continued to rally, posting a rise of 1.2 percentage points to 87.9% nationally,” the website added.